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L1011
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Icelandic Currency Exchange Problem

Thu Apr 16, 2009 9:11 pm

Last week I flew from BOS to LHR on Icelandair with a connection in Reykjavik. On my return I decided to make a 24 hour stopover in Reykjavik, which Icelandair promotes at no extra charge. I exchanged my American currency at the currency exchange booth at KEF with no problem. On my return to BOS, I tried to change it back to American money at the Travelex booth in the airport, and they said they no longer buy Icelandic currency. So I went to the Icelandair check-in counter and asked them where I could exchange it. They said they had no idea, and that they had nothing to do with exchanging currency. So I checked in at the Hilton Hotel at Logan Airport and asked them if they exchange foreign currency. They said yes. But when they saw that I had Icelandic currency, they said no. The next day, I flew home to RIC via ATL, and I went to the Travelex booth at ATL, and they gave me the same story. So today, I went to the Bank of America branch where I have an account, and they said they no longer buy Icelandic currency. So what gives? I have 7500 Icelandic Kronur. Is there anywhere I can exchange it? Or is it worthless? If so, people should be warned to change it back before they leave Iceland.

Bob Bradley
Richmond, VA
Fly Eastern's Golden Falcon DC-7B
 
aero145
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RE: Icelandic Currency Exchange Problem

Thu Apr 16, 2009 9:21 pm



Quoting L1011 (Thread starter):
Or is it worthless?

No offence, but actually it’s very worthless unfortunately.  Sad
 
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Braybuddy
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RE: Icelandic Currency Exchange Problem

Thu Apr 16, 2009 9:23 pm

That's interesting. We were there in December and could easily have had the same problem, as we knew nothing of this policy (if it were in force at the time -- and I presume it's been policy with the bureaux de change you mention since the collapse of the krona last year). We got cash from ATMs and used our credit cards, and (fortunately) had no cash to change on our way home, so didn't encounter the problem. But we never read anything about this in any of the literature on Iceland that we downloaded.

I'd say your best bet would be to offer an Icelander a good exchange rate and ask him to swap. That's if you can find one, of course.   I presume you have a substantial amout of krona?

And it's a warning to anyone travelling to a country where the currency has devalued.

[Edited 2009-04-16 14:25:48]
 
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OA260
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RE: Icelandic Currency Exchange Problem

Thu Apr 16, 2009 9:33 pm

Yeah its the same with Morocco and Tunisia. Change money as and when you need it and don't change more than you intend to spend.
 
aero145
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RE: Icelandic Currency Exchange Problem

Thu Apr 16, 2009 9:36 pm



Quoting Braybuddy (Reply 2):
I presume you have a substantial amout of krona?



Quoting L1011 (Thread starter):
I have 7500 Icelandic Kronur.

A friend of mine may want to get some dollars for these 7500 krónur.
 
L1011
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RE: Icelandic Currency Exchange Problem

Thu Apr 16, 2009 10:14 pm

Aero145:

Do you mean your friend may want to pay some dollars for these 7500 kronur? When I checked on an online currency converter, it showed that they were worth about $59.00 in US currency.

Bob Bradley
Richmond, VA
Fly Eastern's Golden Falcon DC-7B
 
aero145
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RE: Icelandic Currency Exchange Problem

Thu Apr 16, 2009 10:17 pm



Quoting L1011 (Reply 5):
Do you mean your friend may want to pay some dollars for these 7500 kronur? When I checked on an online currency converter, it showed that they were worth about $59.00 in US currency.

I didn’t mean “some” as in “only a few”.  Smile Sorry if it came out that way. I meant he would likely be ready to buy your krónur.

AsgeirS on A.net.

Regards,
David
 
eaa3
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RE: Icelandic Currency Exchange Problem

Thu Apr 16, 2009 10:18 pm



Quoting Aero145 (Reply 4):
A friend of mine may want to get some dollars for these 7500 krónur.

You're turning this around. L1011 want's dollars for these kronur.

Banks outside of Iceland don't carry the currency and outside of Iceland there is no way to exchange it. It's only $50 so just keep it.

However when you do visit Iceland you should keep in mind that everyone takes credit cards. There is no point in having cash. It's just a hassle.
 
andaman
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RE: Icelandic Currency Exchange Problem

Thu Apr 16, 2009 10:27 pm

This economical crisis must have changed the travel habits for many in Iceland, where do the Icelanders travel nowadays?

In the 1990's before the Euro, when alcohol prices were relatively higher than now in Finland, I met two Icelandic guys in a bar drinking beer like no tomorrow because 'beer was so cheap in Finland' ... And the German tourists counting their coins next to us thought they were totally mad  Wink
I think now it's time for me to visit Iceland finally, I have always met really nice, easy going Icelanders only.
Chinese cookie in SFO: "You're doomed to a life of forever travelling abroad and to be able to afford it!"
 
jcs17
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RE: Icelandic Currency Exchange Problem

Thu Apr 16, 2009 10:29 pm

Maybe you can flip them for some Zimbabwean Dollars?  Wink
America's chickens are coming home to rooooost!
 
eaa3
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RE: Icelandic Currency Exchange Problem

Thu Apr 16, 2009 10:33 pm

Quoting Andaman (Reply 8):
This economical crisis must have changed the travel habits for many in Iceland, where do the Icelanders travel nowadays?

In the 1990's before the Euro, when alcohol prices were relatively higher than now in Finland, I met two Icelandic guys in a bar drinking beer like no tomorrow because 'beer was so cheap in Finland' ... And the German tourists counting their coins next to us thought they were totally mad Wink
I think now it's time for me to visit Iceland finally, I have always met really nice, easy going Icelanders only.

The economic crisis did reduce Icelanders travel abroad. In Iceland the government taxes alcohol at a ridiculous rate, apparently to discourage excessive drinking (which they have been successful at doing). So with the combination of that and the fact that during the credit boom the krona was incredibly strong travel abroad was very cheap.

Quoting JCS17 (Reply 9):
Maybe you can flip them for some Zimbabwean Dollars? Wink

That´s funny. Although the Zimbabweans have abandoned their currency and are trying to adopt the US dollar.

This is a much bigger problem though because the same thing that happened in Iceland is happening all over Eastern Europe, South America and Asia i.e. there is a capital flight from these currencies into the Euro, Dollar and Yen. It´s wreaking havoc for eastern Europe and defaults are skyrocketing because the local population financed their mortgages in Swiss francs and Euros. So yeah it´s a problem for Iceland but the same thing is happening elsewhere but because Iceland is much smaller and the currency market much more illiquid the currency market simply can´t handle the capital outflow.

[Edited 2009-04-16 15:38:27]
 
andaman
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RE: Icelandic Currency Exchange Problem

Thu Apr 16, 2009 11:00 pm

Quoting Eaa3 (Reply 10):
because Iceland is much smaller and the currency market much more illiquid the currency market simply can´t handle the capital outflow.

Thinking the people who are badly hit by the economical crisis I'm sure Icelanders are in a better safe, comparing to those in the Baltic states for an example.
Finland had a similar economical crisis in the early 1990's, though not quite as bad as Iceland. The crisis produced a giant unemployment problem, but the 'safety nets' of the welfare system saved many from the total collapse.

[Edited 2009-04-16 16:01:55]
Chinese cookie in SFO: "You're doomed to a life of forever travelling abroad and to be able to afford it!"
 
L410Turbolet
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RE: Icelandic Currency Exchange Problem

Thu Apr 16, 2009 11:14 pm



Quoting Eaa3 (Reply 10):
This is a much bigger problem though because the same thing that happened in Iceland is happening all over Eastern Europe, South America and Asia i.e. there is a capital flight from these currencies into the Euro, Dollar and Yen. It´s wreaking havoc for eastern Europe and defaults are skyrocketing because the local population financed their mortgages in Swiss francs and Euros.

All over? Don't believe everything you read written in The Economist or FT. Especially the one about "mortgages in Swiss francs and Euros".
Those idiots who write such "insightful articles" probably can't tell Slovakia from Slovenia, anyway.
 
eric
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RE: Icelandic Currency Exchange Problem

Thu Apr 16, 2009 11:18 pm

The Icelandic krona trading ban was imposed sometime last year. It was implemented in order to not have a massive currency outflow from the country (thus "reducing" the reserves in the country even further). I believe at present time, there is still the ban in place ensuring any Icelanders cannot exchange more than roughly £200 (ISK equivalent) into foreign currency.

The ISK appreciated massively in the last few years and was easily one of the most overvalued currencies in the world. With the crisis impending in Jan 08, the krona started weakening untill the banks finally collapsed at which the time the currency was tried to be pegged (linked) to the EUR. No one thought that the Icelandic Central Bank had the reserves to support this thus the peg became artificial with ca. 100% variation on the currency quoted by the Central Bank to that traded in the FX markets. I.e. everything became more expensive for Icelanders as everyone wanted to sell ISK but there were no buyers, and I mean no one. As with that, everyone stopped accepting the currency abroad as the agencies had no real mean of trading this in the FX market nor would anyone support their hedges. To date there is still no fundemental belief in the currency as they are trying to get into the EMU.

Quite simply, if you have the currency, you may as well use it to lit your sigars with. At least at KEF they accept the Krona in the Duty Free unlike Morocco where they do not even take the Dirham past passport control.
n
 
eric
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RE: Icelandic Currency Exchange Problem

Thu Apr 16, 2009 11:25 pm



Quoting L410Turbolet (Reply 12):
All over? Don't believe everything you read written in The Economist or FT. Especially the one about "mortgages in Swiss francs and Euros".
Those idiots who write such "insightful articles" probably can't tell Slovakia from Slovenia, anyway.

The problem with the EEC are not the household loans in the market having done currency loans. The problem is that *every* company that has lent money in the last few years has done so in EUR, CHF, USD or GBP because no investor has had much faith in the domestic currencies. The cost of capital has been much lower by lending in these currencies. Additionally, with the value of assets depreciating rapidly in these markets and their real income as well, (as a result of the weakening of their respective currencies versus the FX of the loan) clauses in their contract (referred to in banking speak as "covenants") are coming into play forcing asset sales, shaving of the cost base etc... further weakening the Company. The worst thing is then that a lender will call in their loan. There has been a lot of Private Equity transactions done there where, due to the mixing of funds invested, they have an additional pull on getting their funds in forcing them to get cash from these investments rapidly causing further asset value depreciation. It is an evil circle.
n
 
eaa3
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RE: Icelandic Currency Exchange Problem

Thu Apr 16, 2009 11:28 pm



Quoting L410Turbolet (Reply 12):

All over? Don't believe everything you read written in The Economist or FT. Especially the one about "mortgages in Swiss francs and Euros".
Those idiots who write such "insightful articles" probably can't tell Slovakia from Slovenia, anyway.

Don´t take it personally. The Czech koruna has lost 20% of it´s value from last summer against the Swiss franc, which isn´t that bad. The Polish złoty has however lost 30% (39% at one point in March) of it´s value against the CHF and over 2/3's of Polish mortgages are in Swiss francs. We may not be seeing mass default yet but if this keeps up then people are screwed.
 
eaa3
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RE: Icelandic Currency Exchange Problem

Thu Apr 16, 2009 11:40 pm

Quoting Eric (Reply 13):


The ISK appreciated massively in the last few years and was easily one of the most overvalued currencies in the world. With the crisis impending in Jan 08, the krona started weakening untill the banks finally collapsed at which the time the currency was tried to be pegged (linked) to the EUR. No one thought that the Icelandic Central Bank had the reserves to support this thus the peg became artificial with ca. 100% variation on the currency quoted by the Central Bank to that traded in the FX markets. I.e. everything became more expensive for Icelanders as everyone wanted to sell ISK but there were no buyers, and I mean no one. As with that, everyone stopped accepting the currency abroad as the agencies had no real mean of trading this in the FX market nor would anyone support their hedges. To date there is still no fundemental belief in the currency as they are trying to get into the EMU.

Today in Iceland the central bank is trying to deal with the crisis with the regular IMF (bullshit) formula of high interest rates and running a balanced budget (remember south east asia in 1997). It is however a lost cause. End result is that as long as there is no currency induced inflation, which there isn´t because the currency can´t move much do to the restrictions, you have high interest rates, deflation and government cuts which taken together are a disastrous formula.

It means that at the same time as there is huge reduction in the money supply (deflation) the government is reducing it even further by having high interest rates and running a balanced budget. The IMF´s advice that goes completely against Keynesian recession policy.

Real interest rates, given the deflation, are probably well above 20%.

What good is the treatment (IMF) if the medicine (IMF medicine) has a side effect of killing the patient (Iceland).

[Edited 2009-04-16 16:54:10]

[Edited 2009-04-16 16:54:34]
 
L410Turbolet
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RE: Icelandic Currency Exchange Problem

Thu Apr 16, 2009 11:50 pm



Quoting Eaa3 (Reply 15):
Don´t take it personally. The Czech koruna has lost 20% of it´s value from last summer against the Swiss franc, which isn´t that bad.

I am not taking it personally. On the other hand it's hard to stay neutral when you see the damage caused by some dumbass journalist who happens to work for na overrated magazine and who doesn't bother to check basic facts about a topic he writes.
The second part of the story is that "last summer" the CZK was too strong and businesses were bitching about it and pressing the National Bank to intervene against the CZK, because the local, export-based economy was suffering from it.
The exchange rate CZK/EUR has now only returned to what it was in 2006-07.
http://www.kurzy.cz/default.asp?a_ch...d=a7349&m_chart=EUR_CZK&m_5r=5+let
 
eric
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RE: Icelandic Currency Exchange Problem

Thu Apr 16, 2009 11:59 pm



Quoting Eaa3 (Reply 16):
Today in Iceland the central bank is trying to deal with the crisis with the regular IMF (bullshit) formula of high interest rates and running a balanced budget (remember south east asia in 1997). It is however a lost cause. End result is that as long as there is no currency induced inflation, which there isn´t because the currency can´t move much do to the restrictions, you have high interest rates, deflation and government cuts which taken together are a disastrous formula.

It means that at the same time as there is huge reduction in the money supply (deflation) the government is reducing it even further by having high interest rates and running a balanced budget. The IMF´s advice that goes completely against Keynesian recession policy.

Real interest rates, given the deflation, are probably well above 20%.

Actually, the interest rate in Iceland has been well over 10% since the boom years started, which led to the FX loans to begin with. Someone, with a novel idea, decided that lending cheaply from abroad to purchase could actually buy you a Company a two, then rinse and repeat.

On the rest, I agree. Iceland's problem would never have accelerated to this level had they been a part of the EMU as the economy has always been too small to sustain its own currency.

Most people, myself included, believe what was implemented by the ICB was completely and utterly disastorous (and yourself it would appear). Restricting the supply (despite the fact the currency would burn had it been in free float) would have been the best. The only thing it did prevent was for Iceland to declare itself bankrupt as they had built up a primarily ISK reserves whereas the banks sat on EUR (which again was not allowed to be taken overseas) in addition to ISK. Had the ICB peg held, the banks could have traded in their ISK reserves with issuance of Glacier Bonds (soverign debt (which would have gone at horrendous discount)) and used the EUR to pay their obligations but the Government had other plans (as poor as they were).

The IMF is simply staying put in order to back up the banks, provide the government with a credit line and basically leave the ISK die. Once Iceland, should they manage, joins the EMU many of their issues could be solved barring high interest rate and the only real industry besides fishing has also tanked (aluminium).
n
 
L1011
Topic Author
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RE: Icelandic Currency Exchange Problem

Fri Apr 17, 2009 1:12 am

I used my credit card for my hotel and rental car, but whenever I travel to a foreign country, I like to have some currency in case I go somewhere where they won't accept my credit cards, such as the gas station that wouldn't take my American Express. I guess the next time I go to Europe, I'll once again fly Icelandair. Then when I am making my connection in KEF, I'll spend my 7500 kronur at the airport. Thanks for all your interesting replies.

Bob Bradley
Richmond, VA
Fly Eastern's Golden Falcon DC-7B
 
Go3Team
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RE: Icelandic Currency Exchange Problem

Fri Apr 17, 2009 3:39 am

Interesting reading. I had to go back and see what it cost me 2 years ago to visit Iceland.

Hotel Room: 8700 ISK * 3 nights ~$400
Rental Car: 17000 ISK ~$260

Going by the current rate provided by xe.com, it would cost me half as much as it did 2 years ago. It was a great place to visit, but extremely expensive for food, etc. Maybe they can bring in some visitors now.
Yay Pudding!
 
aero145
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RE: Icelandic Currency Exchange Problem

Fri Apr 17, 2009 1:52 pm



Quoting Eaa3 (Reply 7):
You're turning this around. L1011 want's dollars for these kronur.

Thanks, noticed now. Doesn’t matter then, must have been sleepy or something when I wrote it.  angel 
 
Derico
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RE: Icelandic Currency Exchange Problem

Fri Apr 17, 2009 3:27 pm

Well, what happened to Iceland happened to Argentina a decade ago now (wow), and everyone flocked to the country.

Now things have flipped again and most currencies are way down against the AR$, so argentines are flocking to other countries in Latin America, Africa, Asia, etc. And even against the dollar and euro, while nominally down 15%, not huge compared to other currencies, because of the local inflation rate in wages, the USA and Europe are increasingly cheaper.

So eventually, Iceland's currency should be back, specially considering their level of development!
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